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Trump Accounts – Don’t shoot the messenger
Starting July 1, 2026, if you have a newborn from 2025-2028, that baby gets $1,000 in a Trump account free from the Government. It grows tax deferred and at age 18 its turns into a traditional IRA, if the child doesn’t take it out. You or the grandparents can contribute up to another $5,000 per year to the account. This is a great way to grow money for your children in the future.
Even if you don’t have a newborn, but have a child under 18, you can still open the account and donate up to $5,000 per year. Even that onetime give will grow without tax.
You are limited to specific mutual funds for investments which the Treasury Department designates. So despite the name, this is a good deal for your children. Use it.
No tax Deadlines from January 20, 2020-July 10, 2023
Little Known provision could get Revenue Agent in hot water
Section 7214(b) reads as follows: Any internal revenue officer or employee interested, directly or indirectly, in the manufacture of tobacco, snuff, or cigarettes, or in the production, rectification, or redistillation of distilled spirits, shall be dismissed from office; and each such officer or employee so interested in any such manufacture or production, rectification, or redistillation or production of fermented liquors shall be fined not more than $5,000.
Note the word “shall” be dismissed from office. There’s no way around that. Notice the word “indirectly”. Let’s say a Treasury employee buys almost any mutual fund that owns stock. Chances are one of the stock holdings is Altria or ImBev Altria make cigarettes and is one of the largest distillers in the world. ImBev owns Budweiser which in turn owns lots of other breweries and distilleries. So, simply by owning an interest in a mutual fund that invests in these or other similar companies, is a mandatory firing offense and gets you fined. And remember these mutual fund companies are trading all of the time. So in a moment in time, they might own one of these dreaded stocks.
So, the moral of the story is that if you are an IRS employee, look at what these mutual funds invest in. There are some mutual fund companies that are religious based and do not invest in alcohol or tobacco producing stocks. They returns are not as high, but you can keep your job.
2025 is inching closer
All of the Trump era tax cuts expire in 2025. One of the primary ones is the Estate Tax Exemption amount was raised from $5 Million per person to $10 Million per person ($20 Million per couple). If you’re estate is above $10 Million, now might be a good time to start making gifts. The IRS has issued guidance stating that if you made gift before 2025, the gift will be honored. (Of course Congress can always change that). There are a number of Trust options available to you to allow you to keep the income from the property and give away a remainder. Also with interest rates jumping up 1000% in 2022 (0.44% to 4.8%) , some planning techniques should be explored sooner rather than later as the Federal Reserve continues to tighten the money supply.